Ousted Wachovia CEO has a big interest in a turnaround

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Ken Thompson has millions of reasons to hope the next CEO of Wachovia Corp. can revitalize the bank and its beaten-down stock.

Although Wachovia’s board forced him into early retirement today, the 57-year-old ex-CEO leaves with 5.97 million vested stock options, according to a company filing with the Securities and Exchange Commission.

Unfortunately for Thompson, all of the options are under water: The per-share exercise prices are between $27.56 and $58.36. Shares of Wachovia, the fourth-largest U.S. bank, closed today at $23.40.

But most of the options expire after 2010. Thompson got 1.49 million options in February alone, and they don’t expire until 2018. There is nothing in the filing indicating that earlier expirations will be imposed. So Thompson may yet come out ahead -- depending on how quickly the bank’s fortunes revive, or if a suitor emerges to buy the company at a decent premium.

Thompson won’t be short of cash in the meantime: Wachovia is paying him a retirement benefit of $1.45 million and will cover the costs of an office and an assistant for the next three years. He also will be immediately vested in restricted stock worth $7.1 million.

And he’ll be reimbursed up to $50,000 for legal fees and related expenses incurred ‘in connection with the preparation and negotiation’ of his termination agreement.

Which reminds me to ask: Do CEOs ever pay for anything out of their own pocket?